University of Newcastle - Australia From the SelectedWorks of Neil J Foster 2010 Civil Liability Arising from the Buncefield Explosion- Colour Quest Ltd v Total Downstream UK Plc Neil J Foster Available at: https://works.bepress.com/neil_foster/38/ d o i 1 0 . 1 3 5 0 / e n l r . 2 0 1 0 . 1 2 . 1 . 0 7 6 Case Note CIVIL LIABILITY ARISING FROM THE BUNCEFIELD EXPLOSION Colour Quest Ltd and Others v Total Downstream UK Plc and Others; Total Downstream UK Plc, Total UK Ltd v Chevron Ltd and Others [2009] EWHC 540 (20 March 2009) Keywords: Vicarious liability, private nuisance, public nuisance, Rylands v Fletcher, negligence, pure economic loss THE FACTS OF THE CASE What Mr Justice Steel in this decision of the High Court described as possibly the ‘largest peacetime explosion in Europe’ occurred at the Buncefield Oil Storage Depot in Hemel Hempstead, Hertfordshire on 11 December 2005 (perhaps metaphorically proving Henry Higgins wrong in his dictum that ‘hurricanes hardly ever happen’ in counties beginning with H). There was never any doubt that litigation of various sorts would follow. The possible criminal prosecution of the owners and occupiers of the depot under the Health and Safety at Work Act 1974 (UK) is, apparently, still continuing,1 but the decision in Colour Quest at least concludes the first stage of civil proceedings, in which damages have been sought by many of those impacted by the blast.2 The decision of Steel J covers a large area of legal territory, as well as the convoluted facts surrounding a mix of contracts and working arrangements that created the relevant civil obligations, and makes a number of important findings about what actually led to the terrifying incident. This Note attempts to signal some of the significant legal aspects of the judgment, which will no doubt be influential for some time. The cause of the explosion seems not to be in any real doubt. The depot stored fuel that was pumped into the tanks there from a number of different sources. On the night before the explosion fuel was being pumped into Tank 912. But the gauge that was meant to 1 2 See para. [28] (all paragraph references are to the judgment in Colour Quest unless otherwise noted) where Steel J notes that unusually the first stage of the quite complex civil proceedings had been finalised even before the committal proceedings in the prosecutions had commenced. An earlier ruling of Steel J in related proceedings, West London Pipeline and Storage Ltd v Total UK Ltd [2008] EWHC 1296 (Comm), dealt with an application for discovery and concluded that information about insurance held by a company that had manufactured a faulty alarm was not relevant to contribution proceedings. The case is noted in N. Dunleavy, ‘Principles of Apportionment in Contribution Cases’ (2009) 125 LQR 239–244. –––––––––––––––––––––––––––––––––––––––––––– 1 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W measure the level of the fuel had become stuck at 96 per cent, as a result of which fuel continued to be pumped into the tank until it started to overflow. Another mechanism that was intended to provide a ‘back-up’ switch to cut off the fuel when the tank became too full had been disabled following testing, and therefore did not operate. What was unexpected seems to have been the fact that the fuel, when it began to flow out of the tank, did so not as a liquid but as a fine white mist, which gradually accumulated around the site. Finally the explosion occurred at a moment when the layer of mist had reached about 7 metres, through an ignition source of some sort (the precise nature of which was the only real mystery, although – because it could have been any of a number of ordinary events, including some car engines which apparently began ‘racing’ when covered in the mist – identifying the final source of ignition was not seen to be crucial). The number of civil actions commenced against the various defendants was huge. Thankfully (and almost miraculously) no one was actually killed in the massive explosion – an outcome that, as Steel J noted, can only be attributed to the fact that it happened early on a Sunday morning – although 43 people were injured. Outside the perimeter of the depot was an industrial estate where, on a weekday morning, about 16,500 people would have been working for some 600 businesses. 20 premises were completely destroyed and another 60 were rendered unusable. Colour Quest Ltd, the ‘lead claimant’, was simply one of these many local businesses. THE JUDGMENT So, who was to blame for the failure of the mechanisms designed to prevent this disastrous overflow of fuel? It is important to briefly note the identity of the main defendants. The companies, Total and Chevron, ran the depot generally as part of a joint venture called Hertfordshire Oil Storage Ltd (HOSL). It was agreed that ownership of the joint venture was divided 60 per cent to Total and 40 per cent to Chevron. Perhaps oddly,3 however, HOSL was regarded to some extent as a separate legal entity and was separately represented at the trial. Formally a number of companies associated with Total were defendants (like the judge, this Note will not differentiate them), as well as the joint venture HOSL. Also involved, as being sued for contribution (Part 20 defendants, as the judge described them4), were Chevron and TAV Engineering, a company which had been responsible for the ‘back-up’ failsafe mechanism that had failed. The company that had installed other parts of the tank equipment, Motherwell, was also joined, but went into liquidation before the trial concluded. The claimants were many, but broadly fell into two groups – those ‘inside the fence’ (other companies with interests within the perimeter of the depot which had been destroyed or damaged) and those ‘outside the fence’ (both companies and members of the public outside the perimeter.) The reason for the difference between the two groups of claimant lay partly in the legal issues raised by the decision in Rylands v Fletcher.5 Rylands, of course, stands for the proposition that someone who brings a ‘non-natural’ dangerous substance onto land that they occupy is strictly liable if that substance escapes and causes harm to others (unless certain narrowly defined defences are made out.) Inter- 3 4 5 Because HOSL seems not to have been a separate company, simply being in the nature of a ‘partnership’ between the two parent companies. [2009] EWHC 540, para. 18. (1866) LR 1 Ex 265 (Blackburn J), (1868) LR 3 HL 330 (House of Lords). –––––––––––––––––––––––––––––––––––––––––––– 2 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 C A S E N O T E estingly, over a decade ago, the High Court of Australia in Burnie Port Authority6 ruled that Rylands was no longer needed as a ground of civil liability, having effectively been ‘subsumed’ in the tort of negligence. But these proceedings leave no doubt that in the UK Rylands liability is very much alive and well, and the fact that there was clear liability to those ‘outside the fence’ under these principles seems to have led to an early admission of liability by Total and HOSL.7 In addition there were early admissions by the two main defendants, Total and HOSL, that one of them was vicariously liable for what was conceded to be negligence by the operators.8 As a result the remaining legal issues at stake were reasonably narrow: • whether all the ‘economic loss’ suffered by various businesses was recoverable; • as between Total and Chevron, which company was the employer of the careless workers, and hence bore primary ‘vicarious’ responsibility (and so the lion’s share of the apportioned damages).9 Vicarious liability: who was the employer? Determining who was the employer of the admittedly negligent operators turned out to be a very complex issue. Steel J gave a lengthy account of the various contractual arrangements in place between the parties over many years, complicated by the fact that there was a joint venture agreement in place in relation to another refinery/storage site at Avonmouth, near Bristol, and that some of the terms of the relationships between the parties at the Buncefield site had been simply adopted from this previous agreement. In the end one of the most significant documents recorded that a company called Fina (predecessor of Total) would ‘second’ its staff to the joint venture company HOSL. But, as Steel J noted,10 the crucial question was what this term actually meant. Quite what ‘secondment’ entailed was a matter of controversy. In particular, did it mean a temporary transfer of ‘employment’ (Total’s case) or a temporary transfer of ‘role or place of employment’ (Chevron’s case)? Total’s case, in other words, was that any employee ‘seconded’ to the joint venture thereafter became an employee of HOSL; whereas Chevron’s case was that such employee remained an employee of Total/Fina, but was simply performing work on the site managed by HOSL (something similar to a standard ‘labour hire’ arrangement). The law provides, of course, that an employer is vicariously liable for torts committed by employees who are acting in the course (or ‘scope’) of their employment.11 Such liability can attach even though an employee has acted carelessly, even ‘grossly’ carelessly, and in many cases even though an employee has acted in direct disobedience of directions given 6 7 8 9 10 11 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520. See [2009] EWHC 540, para. 24. In the UK it seems settled that there is no liability under Rylands principles for bodily injury – Transco v Stockport MBC [2004] 2 AC 1. This may explain the fact that there seem to have been no such claims made by the 43 injured persons; it is to be hoped that payments were made in any case (there could, of course, have been liability in negligence were such claims to be pursued). See [2009] EWHC 540, para. [23]. Technically the debate was whether the joint venture entity, HOSL, was the employer, which would have implicated Chevron to some 40%, or whether (as Chevron argued) Total alone was the employer. [2009] EWHC 540, para. [75]. For a recent high-level review of the principles of vicarious liability, see in the UK Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 and Majrowski v Guy’s and St Thomas’ NHS Trust [2007] 1 AC 224; in Australia, NSW v Lepore (2003) 212 CLR 511 and Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161. –––––––––––––––––––––––––––––––––––––––––––– 3 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W by the employer, so long as in general the employee is ‘doing what they are paid to do’, and not acting on a so-called ‘frolic’ of his or her own.12 The main employee whose actions were identified as causing the explosion was a Mr Nash, the Pipeline Supervisor. It was clear that however careless his actions were, he was acting in the course of his employment. The issue, then, was the identity of his employer at the relevant time. It was not disputed that Mr Nash had a general contract of employment with Total. But Total relied on a number of older cases to argue that, in the circumstances of this case, he had been temporarily ‘transferred’ as an employee to the joint venture HOSL, under the doctrine of employment pro hac vice. Some comments about this fairly obscure doctrine seem to be in order. The Latin phrase literally means ‘for this occasion’. While the doctrine has not been discussed very often in the last few years, it has been raised not only here but also in two Australian judgments: the decision of the NSW Court of Appeal in Transtate Pty Ltd v Rauk13 and the trial decision of Ashley J in the Supreme Court of Victoria in Deutz Australia Pty Ltd v Skilled Engineering Ltd and Another.14 Ashley J in Deutz15 gives a very helpful detailed analysis of the history and development of the doctrine. Effectively his Honour distinguishes two possible situations. One is where the loaned employee has injured a third party, and the issue raised is whether the temporary ‘employer’ or the general employer should be held vicariously liable for the injury. The second is where it is the loaned employee who has been injured, and the question is whether the temporary or the general employer should provide compensation for the injury. In the first situation, on the question of vicarious liability, authority establishes that the courts may sometimes regard the temporary ‘employer’ as the worker’s employer pro hac vice and impose vicarious liability for the employee’s actions on the temporary employer.16 This will exonerate the general employer from its usual obligations. However, it has been held that there is a very heavy burden of proof on the general employer in these circumstances, and what must be shown is that there is a transfer of the right not merely to say what work should be done but also the way in which the work must be done. Ashley J cites17 the following passage from the judgment of Lord Denning MR in Denham v Midland Employers Mutual Assurance Ltd:18 The supposed transfer, when it takes place, is nothing more than a device – a very convenient and just device, mark you – to put liability on to the temporary employer; and even this device has in recent years been very much restricted in its operation. It only applies when the servant is transferred so completely that the temporary employer has the right to dictate, not only what the servant is to do, but also how he is to do it … Such a transfer rarely takes place, if ever, when 12 13 14 15 16 17 18 For cases of vicarious liability despite gross stupidity or disobedience, see the classic decisions in Century Insurance Co Ltd v Northern Ireland Road Transport Board [1942] AC 509 and Bugge v Brown (1919) 26 CLR 110. [2002] NSWCA 222. [2001] VSC 194. Ibid. at paras 93–122. See Mersey Docks & Harbour Board v Coggins & Griffith (Liverpool) Ltd & Anor [1947] AC 1. [2001] VSC 194, para. 100. [1955] 2 QB 437. –––––––––––––––––––––––––––––––––––––––––––– 4 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 C A S E N O T E a man is lent with a machine, such as a crane or a lorry; nor when a skilled man is lent so as to exercise his skill for the temporary employer. In such case the parties do not contemplate that the temporary employer shall tell the man how to manipulate his machine or to exercise his skill. But a transfer does sometimes take place in the case when an unskilled man is lent to help with labouring work: see Garrard v A.E. Southey & Co [1952] 2 QB 174; [1952] 1 TLR 630; [1952] 1 All ER 597.19 [emphasis added] On the other hand, in the second situation where the issue is who should bear responsibility for a personal injury suffered by the worker, Ashley J points out20 that the courts have sometimes been prepared to find a relationship of employment pro hac vice on a lesser degree of proof, to ensure that a worker will not miss out on compensation.21 However, as his Honour comments, ‘a claim can be mounted in such a case without resort to the relationship of employer and employee’. Indeed, perhaps one of the reasons that the doctrine of employment pro hac vice has become less popular in recent years is that the courts have begun to recognize a number of cases where a duty of care may be owed by someone running a business to those who do the work of the business but may not be employees – such as contractors, employees of contractors, or labour hire workers. One such case was Transtate Pty Ltd v Rauk,22 in which Mr Rauk had been performing work as an employee, had then been asked by the company Transtate to resign and set up a company, and then to go back to work for Transtate as a ‘labour hire worker’ employed by his family company. His working conditions effectively remained precisely the same as those that applied when he was an employee, and the court found no difficulty in concluding that the company still owed him a duty of care which was effectively the same duty it owed him when he was an employee. One of the few cases in recent years where an effective ‘temporary transfer’ of employment has been held to have taken place was Hawley v Luminar Leisure Ltd and Others.23 A ‘bouncer’ at a club, supplied by a security company, was held to have effectively been so integrated into the workplace at the club, and to have been so completely under the control of the club management, that he had become a club employee (and hence the club was vicariously liable for an assault he had committed). In the more recent case of Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH,24 however, the Court of Appeal found that the high degree of compelling evidence of a transfer of control to the ‘temporary’ employer had not been established. To return to the Colour Quest litigation, Steel J adopted the House of Lords decision that had been referred to previously by Ashley J, Mersey Docks, to rule that the essential issue in determining whether there had been a temporary transfer of employment was the identity of the person who has the right to control the employee’s method of work: that is to say not the nature of the work but the manner in which it was to be undertaken.25 19 20 21 22 23 24 25 Ibid. at 446–447. [2001] VSC 194, at para. 115. One such case was Garrard v A.E. Southey & Co. and Standard Telephones and Cables Ltd. [1952] 2 QB 174 – the case mentioned by Lord Denning MR at the end of the quote above, and a case referred to by Powell JA in the Rauk appeal noted below, n.21. [2002] NSWCA 222. [2006] EWCA Civ 18. [2008] EWCA Civ 1257. [2009] EWHC 540, para. 207. –––––––––––––––––––––––––––––––––––––––––––– 5 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W Steel J also noted26 that the possibility that there could be more than one ‘employer’ held to be vicariously liable for the same tortious act of a worker had been recognised in the Court of Appeal decision in Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd.27 In Colour Quest, however, neither Total nor Chevron had argued for this ‘dual’ vicarious liability. It should be noted that while Viasystems is, of course, binding on courts in England and Wales unless reviewed by the UK Supreme Court,28 the decision departs from what had long been understood to be the orthodox position at common law, that no servant could have two masters.29 The implications of what seems to be the contrary ruling have not yet been fully worked out (no court since Viasystems has actually found dual vicarious liability),30 and the decision has not yet been followed on this point in Australia.31 It does seem to overturn assumptions that have been made in this area for many years, and to present a number of problems. For example, how can someone be regarded as an employee of X when he or she has never even entered into a contract with X? Be that as it may, the question of vicarious liability in Colour Quest was resolved on the more orthodox approach of determining which of the two possible ‘controlling parties’ was the employer. After an exhaustive review of the available information and documents, Steel J concluded32 that it was Total alone who was not only Mr Nash’s employer on paper, but also in practical terms was in control of the tank filling operation. All the staff at the HOSL site were engaged and paid by Total. They were all subject to Total’s promotion and disciplinary arrangements. Their place of work was allocated by Total. All these matters were undertaken without any discussion with, let alone approval of, the HOSL board. All instructions relating to the safe operation of the Buncefield site were promulgated by Total in accord with standards adopted by Total for all terminals which it regarded as being operated by Total. It was Mr White who was responsible for identifying tank filling as a critical task and creating any necessary work procedures. These were to be audited every 18 months by Total head office staff. I am satisfied that Total had control of tank filling operations … I conclude that Total has failed to discharge the burden of establishing that HOSL was responsible for the negligence of Mr Nash. The final conclusion was put in this way, because the existence of the admitted contract of employment meant that Total bore the ‘heavy burden’ noted above of establishing that Mr Nash had become, pro hac vice, an employee of HOSL. 26 27 28 29 30 31 32 Ibid., para. 212. [2005] 4 All ER 1181. The successor since 1 October 2009, of course, to the Appellate Committee of the House of Lords. A proposition more commonly assumed than debated, but which is often sourced back to Laugher v Pointer [1826] 5 B&C 547, 558. The authority of Viasystems was accepted in the later case of Hawley v Luminar Leisure Ltd (above, n.22) but not applied on the facts of the particular case. In an employment case, Cairns v Visteon UK Ltd [2006] UKEAT 0494 06 2911 (29 November 2006) the Employment Appeal Panel noted the decision in Viasystems but concluded that, even if were applicable to a question of vicarious liability, they would not apply the doctrine to an action for ‘unfair dismissal’ by allowing the worker to effectively sue two parties as liable for a dismissal. Viasystems was referred to in passing in the NSW Court of Appeal in Darke v El Debal [2006] NSWCA 86 at para. 4, but with no comment as to its correctness or otherwise. It was mentioned but not adopted in a Federal Court of Australia trial decision in Wilton & Cumberland v Coal & Allied Operations Pty Ltd [2007] FCA 725 (15 May 2007). [2009] EWHC 540, paras. 310–313. –––––––––––––––––––––––––––––––––––––––––––– 6 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 C A S E N O T E Before leaving the question of vicarious liability, it is important to note another aspect of the decision. As mentioned earlier, carelessness by the operators on duty, particularly Mr Nash, was conceded. This concession, however, may not be quite as generous as it seems. In light of work done over some years by Andrew Hopkins examining similar major explosions33 it seems highly likely that a careful examination of the circumstances would reveal not simply casual acts of negligence, but also underlying management failures. By accepting negligence based on vicarious liability for the carelessness of the operators, the companies involved may have tried to remove the need for the court to examine the decisions of senior management more closely. In fact, however, Steel J in Colour Quest went on to consider the possible liability of senior management in an important passage of the judgment.34 There he recounted, by reference to what the parties had agreed was ‘best practice’ in the area – as set out in a document published by the American Petroleum Institute, Overfill Protection for Storage Tanks in Petroleum Facilities (API 2350) – a series of management failures which lay behind the events of December 2005. These included a failure to provide documentation for procedures to be followed in the case of overfills, a failure by management to properly respond to a similar overfill event that had occurred in 2003 (justifiably described35 as a ‘dress rehearsal’ for the tragedy of 2005), and allowing the development of a culture in the control room which used overfill warning alarms to be routinely used as markers when a fill was complete, instead of operating as warnings of an emergency about to happen. Steel J concluded36 that: Chevron (and the Claimants) has made good their case that one of the causes of the explosion was the failure to promulgate an adequate system to prevent overfilling of a tank. This was a fault which can be laid at the door of head office staff. A number of other issues were raised by Total as possible defences to the various causes of action. Rylands v Fletcher – consent As noted earlier, Total had conceded liability under Rylands v Fletcher to those claimants who were situated ‘outside the fence’ of the refinery area. Clearly there had been a relevant ‘escape’ of a dangerous substance which had caused harm. But Total claimed that those claimants who were lessees or licensees of areas within the refinery could not recover under Rylands, as (they claimed) there was authority holding that those who consented to certain activities taking place on their land, could not complain if those activities later led to harm.37 Steel J rejected this analysis of the law, although the discussion is (perhaps understandably in a lengthy judgment dealing with a plethora of factual and legal issues) somewhat abbreviated. He seems to accept that to some extent a claim in Rylands would be defeated 33 34 35 36 37 See A. Hopkins, Lessons from Longford: The Esso Gas Plant Explosion (Sydney: CCH, 2000), and Failure to Learn: the BP Texas City Refinery Disaster (Sydney: CCH, 2008). [2009] EWHC 540, at paras 330–361. Ibid., at para. 353. Ibid., at para. 361. For a general discussion of the defence, see Clerk & Lindsell on Torts (19th edn, 2006), paras 21–23. –––––––––––––––––––––––––––––––––––––––––––– 7 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W if consent had been given to the accumulation of a substance, and all that was complained of was the simple escape of the substance. But where the substance escaped as a result of the carelessness of the defendant, there would be no barrier to a Rylands v Fletcher action based on that escape (as ‘consent’ could not be implied to negligent storage or handling). With respect, this view seems sensible but at this point it becomes difficult to separate the action in Rylands from a simple action in negligence. To some extent the discussion becomes irrelevant, because it was clear that an action in negligence was available. He concludes the discussion by saying:38 The distinction between the position where there is an absence of consent by reason of systemic negligence and where there is vitiation of any consent by reason of negligent conduct at the time of the explosion is, on the above analysis, somewhat academic. Private nuisance The tort action for private nuisance involves: Unlawful interference with a person’s use or enjoyment of land, or some right over or in connection with it.39 Clearly those who owned or leased property in the near vicinity of the Buncefield plant had suffered substantial interference with their use and enjoyment of the property. Total argued that, while an action in Rylands v Fletcher might be available, there was no action in private nuisance, because that tort dealt with an ‘ongoing’ situation of interference with interests in land, rather than a ‘one-off’ escape. Steel J reviewed the relevant authorities and concluded that, while there was some support for the view that Rylands v Fletcher was only relevant to a ‘one-off’ incident, there were a number of cases where private nuisance actions had also been successfully used. He concluded:40 The position is that on appropriate facts there can be liability in private nuisance for a single or isolated escape as opposed to a state of affairs where there is both unreasonable or negligent user of land and foreseeability of escape. Public nuisance A number of interesting and complex issues were dealt with under the rubric of the action for public nuisance. This tort, which is different from (though as this judgment illustrates, has connections with) the tort of private nuisance, is unusual in that it can also be regarded as a crime. It involves a wrong that affects the public at large, affecting their reasonable comfort and convenience. (For a recent discussion by the House of Lords of the relationship between the tort and the crime see R v Rimmington.)41 38 39 40 41 [2009] EWHC 540, para. 406. W.V.H. Rogers, Winfield and Jolowicz on Tort, 14th edn (Sweet & Maxwell: London, 1994) 404. [2009] EWHC 540, para. 461. [2006] HRLR 3; [2005] UKHL 63. –––––––––––––––––––––––––––––––––––––––––––– 8 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 C A S E N O T E For it to be actionable as a tort, however, the claimant must show that he or she has suffered some ‘particular’ damage over and above that suffered by members of the public at large. Many of the cases in which a successful action has been taken involve the public right to use a highway or a navigable river.42 In Colour Quest Total put forward a number of arguments challenging the extent to which this action was available. They were that: • the action could not be used as an alternative to an action in private nuisance; in other words, that where an interference with private land had been established, that could not also form the basis of a public nuisance; • in any case, no claim could be made in public nuisance for economic loss caused by the inability of customers to gain access to a business, as opposed to direct property loss suffered by the occupiers; • an action in public nuisance would only be available where the claimants owned land in proximity to the refinery site. Concurrent actions in private and public nuisance Steel J rejected the claim that actions in both private and public nuisance were not concurrently available. While an action in public nuisance required an interference with rights held by ‘the public’, the action could be maintained not just in relation to rights held ‘jointly’ by members of the public (as in the case of rights of passage along highways) but also where there was a simultaneous interference with a number of individual rights over land of the same nature. It follows that whilst a private owner’s right to the enjoyment of his own land is not a right enjoyed by him in common with other members of the public, nonetheless any illegitimate interference, being the very same interference contemporaneously suffered by other members of the public, constitutes a common injury satisfying the public nature of a public nuisance.43 Indeed Steel J noted, quoting an earlier decision, that ‘a normal and legitimate way of proving a public nuisance is to prove a sufficiently large collection of private nuisances’.44 Claims for loss of custom A surprisingly difficult question, however, is whether the measure of damages for public nuisance may include an award to represent the loss occasioned by the fact that customers and other members of the public are not able to access the claimant’s business premises. Steel J provided a lengthy review of decisions in which the highest courts in England seem to have taken different and irreconcilable views (some of which were apparently influenced by differing views of members of the judiciary as to the appropriate compensation to be awarded to business owners affected by the spread of the railways). In the end, however, he concluded that the best modern authority45 is that such recovery is available: I conclude that there is long standing and consistent authority in support of the proposition that a claimant can recover damages in public nuisance where access to or from his premises is 42 43 44 45 For example, in Australia, see the classic judgment of Sholl J in Walsh v Ervin [1952] VLR 361. [2009] EWHC 540, para. 430. Citing Attorney-General v PYA Quarries Ltd [1957] 2 QB 169, at 188, 190. Citing the comments of Lord Hoffman in Wildtree Hotel v Harrow LBC [2001] 2 AC 1. –––––––––––––––––––––––––––––––––––––––––––– 9 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W obstructed so as to occasion a loss of trade attributable to obstruction of his customers’ use of the highway and liberty of access.46 Need for rights in land in proximity Thirdly, Total’s claim that an action in public nuisance requires the claimant to have proprietary rights in nearby land was comprehensively rejected. While the holding of rights in land is clearly an essential element of the action for private nuisance,47 it has never been regarded as essential for a public nuisance claim (as the common use of the action in public nuisance in relation to the blocking of public highways should have made clear). Steel J noted48 that this was spelled out in Lord Bingham’s judgment in Rimmington:49 It became clear over time that there were some acts and omissions which were socially objectionable but could not found an action in private nuisance because the injury was suffered by the local community as a whole rather than by individual victims and because members of the public suffered injury to their rights as such rather than as private owners or occupiers of land.50 While in some situations whether or not land is occupied near the source of the alleged public nuisance may impact upon the question of whether appropriate ‘special damage’ can be established, occupation of land is not an essential element of the action for public nuisance.51 Negligence claims by Shell and pipeline operators The final set of legal issues considered in these preliminary proceedings involved a possible claim in negligence by Shell and two bodies involved in running pipelines, United Kingdom Oil Pipelines Ltd (UKOP) and West London Pipeline and Storage Ltd (WLPS).52 These were ‘inside the fence’ companies, whose physical assets were damaged or destroyed by the blast but who, by virtue of being inside what was regarded as the ‘fence’ of the site, had conceded that they were not able to make claims based on ‘escape’ of dangerous substances under Rylands v Fletcher.53 It was accepted that Shell and the other parties had valid claims relating to destruction of private property within the depot area. This included, for example, aviation fuel belonging to Shell actually being stored in the tanks. But the controversial aspect of the claim was the claim for ‘consequential economic loss’ flowing from the explosion, which included a claim for losses suffered by Shell in not being able to supply fuel to custom- 46 47 48 49 50 51 52 53 [2009] EWHC 540, para. 459. Hunter and Others v Canary Wharf Ltd [1997] 2 All ER 426 (House of Lords); for an Australian case to same effect, see Oldham v Lawson (No. 1) [1976] VR 654. [2009] EWHC 540, para. 463 R v Rimmington, above n. 40. Ibid., para.6. In Colour Quest Steel J did not rule on the question whether the individual claimants had been able to show ‘special damage’ for the purposes of the tort of public nuisance; this was to be decided at a later stage of the proceedings if needed – see [2009] EWHC 540, para. 434 where this is described as ‘an issue for another day’. See [2009] EWHC 540, para. 5, for some description of the roles of these companies. It is not entirely clear from the judgment why, given that certain identifiable areas of the overall ‘depot’ were owned by these companies (see [2009] EWHC 540, para. 17), a Rylands claim was not made with the area from which the escape occurred being more narrowly identified as the part managed by HOSL. But it may be that concessions were made due to difficulties in pinning down legal ownership of various sections of the depot. ––––––––––––––––––––––––––––––––––––––––––– 10 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 C A S E N O T E ers as promised (which presumably involved Shell in either having to purchase fuel from elsewhere or paying penalties for not meeting supply obligations). This claim lay in the heartland of an area with which the law of negligence has been struggling for many years. Claims for so-called ‘pure’ economic loss (not directly related to bodily injury or destruction of specific property) have been subject to rigorous scrutiny and to a number of important ‘control mechanisms’. The reasons for imposing these extra rules have been said to relate to the need to avoid opening the floodgates to ‘indeterminate liability to an indeterminate class for an indeterminate time’,54 and the undesirability of interfering with legitimate commercial competition. Those who favour a ‘rights-based’ approach to tort law have also argued against wide recovery for pure economic loss on other grounds.55 Shell attempted to side-step this reluctance to award damages for pure economic loss in a number of ways. One was to argue that recovery in negligence was available where there had been interference with a chattel to which the claimant had a right of immediate possession (and that the oil in the pipelines and the pipelines themselves were things to which Shell had such a right). Another approach was to argue for the application of an ‘exception’ to the usual exclusionary rule derived from Morrison Steamship Co. Ltd v Greystoke Castle.56 The third approach was to argue that the Court should apply the decision of the High Court of Australia in Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad’.57 For the purposes of this Note it can simply be recorded that the second argument, based on the reasoning in Greystoke Castle, was effectively rejected on the basis that the decision was not really consistent with a number of other authorities if regarded as a general decision on the law of negligence. Steel J concluded that it represented a specific rule relevant to maritime law and hence not applicable in this case. Right to possession of the pipelines Shell’s attempt to argue that a right to possession of the pipelines would have given it a chance of recovering the claimed loss of custom was to some extent successful, in that Steel J concluded, after a review of the authorities, that an ‘immediate right to possession’ would have formed the basis of an action in negligence and hence some chance of recovery.58 However, a careful examination of the legal arrangements concerning the pipelines led to the view that Shell could not establish such a right. The two companies, WLPS and UKOP, had been set up to hold title to the various pipelines and, while Shell (and some other joint venture companies) were entitled to use the lines, there was no sense in which they had an ‘immediate right to possession’ of the pipelines which they could have exercised without taking into account the rights of the other parties to the arrangement.59 The decision in Caltex Oil 54 55 56 57 58 59 Cardozo CJ in the US case of Ultramarines Corporation v Touche (1931) 255 NY Rep 170. See e.g. Robert Stevens, Torts and Rights (Oxford University Press: Oxford, 2007) 21: ‘The common law’s starting position is that the infliction of economic loss does not per se infringe any right of the claimant’, and Alan Beever, ‘A Rights-Based Approach to the Recovery of Economic Loss in Negligence’ (2004) 4 Oxford University Commonwealth Law Journal 25–49. [1947] AC 265. (1976) 136 CLR 529. [2009] EWHC 540, para 498. See [2009] EWHC 540, para 501. ––––––––––––––––––––––––––––––––––––––––––– 11 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W A more promising basis for recovery, at first sight, seemed to be this decision of the High Court of Australia. There the dredge Willemstad negligently damaged the pipeline carrying oil to the Caltex refinery. Caltex, however, did not own the pipeline. The question was whether Caltex could recover damages for the loss of custom, and the need to make alternative arrangements that it suffered until the supply of oil in the pipeline could be restored. The High Court held that the claim for economic loss should succeed. The difficulty for Shell, however, was that this was an Australian decision which had in fact been considered and not received very warmly by the Privy Council in the subsequent decision of Candlewood Navigation Corp. Ltd v Mistui OSK Lines Ltd (The Mineral Transporter).60 Since then there had been no UK decision adopting Caltex Oil, and Steel J in his judgment was no exception to the rule. He declined to follow Caltex and ruled that Shell was not entitled to recover its consequential economic loss. COMMENTARY The judgment of Steel J in Colour Quest is likely to be referred to for some years on a number of important points of law, especially those likely to be raised in connection with the environmental consequences of major explosions. It provides an interesting example of the application of another seminal decision handed down in the 19th century when ‘industrial disasters’ first became more common – that in Rylands v Fletcher. In this context the historical study of that case by Professor A.W.B. Simpson is instructive.61 He notes that the decision (while itself not involving loss of life) was handed down in the shadow of the bursting of a major dam at Sheffield in 1864 with the loss of 238 lives, which itself had followed a previous dam bursting at Holmfirth in 1852, killing 78 people. The judges were conscious of these new large bodies of water being erected to service not only the growing populations of the towns of the Industrial Revolution, but the industry itself. If large dams like these were to be built, it seemed a fair rule that they should be built at the risk of those who would profit from them, rather than the innocent neighbours who might be harmed by their bursting. Rylands’ dam had been built by him for the purposes of his very profitable cotton mill. The Buncefield proceedings provide yet another reason to think that the principle in Rylands, while not invoked regularly, is an important feature of the law of tort.62 It is to be regretted that the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd 63 chose to abolish the principle as a part of the law of Australia. Its operation here in relation to claimants who had suffered clear physical loss ‘outside the fence’ shows that it can achieve a sensible and just result without the need for the expensive and time-consuming proof of negligence that would have to be offered in a case depending on that tort alone. One aspect of the decision relating to Rylands seems at first sight to be a bit odd.64 A claim under this principle should conceptually only require that the defendant be the occupier of the land, rather than that there be any proof of a particular employment relation- 60 61 62 63 64 [1986] AC 1. See A.W.B. Simpson, Leading Cases in the Common Law (Clarendon Press: Oxford, 1995), Chapter 8 ‘Bursting Reservoirs and Victorian Tort Law: Rylands v Fletcher (1868)’. See J. Murphy, ‘The Merits of Rylands v Fletcher’ (2004) 24 Oxford Journal of Legal Studies 643–669, whose view seems preferable to that put in D. Nolan, ‘The Distinctiveness of Rylands v Fletcher’ (2005) 121 Law Quarterly Review 421–451. Above, n.6. I owe the identification of this issue to my colleague, Professor Jenny Steele. ––––––––––––––––––––––––––––––––––––––––––– 12 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 C A S E N O T E ship with the person causing the ‘escape’. (Indeed, in Rylands itself the harm had been caused by a contractor.) So why, then, is so much time spent on the question of vicarious liability?65 However, on an overall reading of the case there are, of course, a class of claimants ‘inside the fence’ as to whom it was not conceded that there was a valid Rylands v Fletcher claim and whose claims had to be made out in negligence.66 This explains why detailed consideration of vicarious liability was necessary. It was also necessary if claims were to be based on private and public nuisance (as in each case it is not the defendant’s occupation of land that is in issue, but the impact of the defendant’s action on the claimant’s land or ‘public rights’). On the question of consequential economic loss – with the greatest respect to Steel J, who was considering the matter at the end of a lengthy judgment canvassing many complex issues – it is suggested that more consideration should have been given to this point. From an Australian perspective, while it is fair to say that Caltex Oil itself had found little support for many years, it is still an authoritative decision, and the High Court of Australia revisited the area of consequential economic loss in an important judgment in Perre v Apand Pty Ltd.67 While, as with the Caltex decision, it is fair to say that commentators have struggled to find a clear ratio for that decision,68 there seems no doubt that there are at least some circumstances in which a litigant in Australia can recover for what has come to be called ‘relational’ economic loss. This category covers cases where a defendant has committed a clear tortious act against a third party, who is in a commercial relationship of some sort with the plaintiff, and the courts have found that the defendant could foresee the harm which occurred to the plaintiff and owed a duty of care to that plaintiff. Perhaps what has come to be seen as the main judgment in Perre was given by McHugh J, who held69 that a duty of care to avoid economic loss would arise where • • • • • the loss was foreseeable; the people who would suffer the loss were a clearly identifiable group; the defendant was not simply acting to legitimately forward its own interests; the plaintiff was particularly vulnerable; and the defendant knew of the likely consequences of its actions. The notion of ‘vulnerability’ of the plaintiff to harm at the hands of the defendant was explained by McHugh J in this way: What is likely to be decisive, and always of relevance, in determining whether a duty of care is owed is the answer to the question, ‘How vulnerable was the plaintiff to incurring loss by reason of the defendant’s conduct?’ So also is the actual knowledge of the defendant concerning that risk and its magnitude. If no question of indeterminate liability is present and the defendant, having no legitimate interest to pursue, is aware that his or her conduct will cause economic loss to persons who are not easily able to protect themselves against that loss, it seems to accord 65 66 67 68 69 And see the comment by Steel J in [2009] EWHC 540, para. 205, which suggests that ‘no distinction need be drawn as regards vicarious responsibility for liability arising in nuisance or in Rylands v Fletcher’. See [2009] EWHC 540, the discussion from para. 465. (1999) 198 CLR 180. See e.g. J. Dietrich, ‘Liability in Negligence for Pure Economic Loss: The Latest Chapter (Perre v Apand Pty Ltd)’ (2000) 7 James Cook University Law Review 74–95. (1999) 198 CLR 180, para. 105. ––––––––––––––––––––––––––––––––––––––––––– 13 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4 E N V I R O N M E N T A L L A W R E V I E W with current community standards in most, if not all, cases to require the defendant to have the interests of those persons in mind before he or she embarks on that conduct.70 [emphasis added] In Perre itself the plaintiffs were held to be able to recover damages from a company, Apand, which had supplied diseased potato seed to a neighbouring farmer, where the export market of the plaintiff was affected by geographical proximity to any diseased seed. Since the decision in Perre, cases allowing recovery of economic loss in Australia have not been legion, but have included Valleyfield Pty Ltd v Primac Ltd 71 (the defendant had designed an irrigation system which it knew was to be used on the plaintiff’s property), and Fortuna Seafoods Pty Ltd v The Ship ‘Eternal Wind’72 (where a collision by a ship with a fishing boat meant that the fish processing business owned by the plaintiffs was foreseeably impacted). The case in the circumstances of the Buncefield explosion for allowing Shell a possible action on these principles (even were Australian law applicable) is not an open and shut one. Detailed consideration would have to be given to the question of ‘vulnerability’, which would focus on the issue of whether Shell had some means of legally protecting itself from the consequences of a major interruption of supply of fuel caused by an explosion of this sort. It is instructive to note that in Australia, even after the decision in Perre, claims for economic loss made by a number of Victorian businesses following what might be described as a similar disastrous explosion (that of the Esso Longford gas plant) were dismissed at first instance in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd.73 Nevertheless it seems possible that future consideration of claims like this one by Shell may open the door to further developments in the law of negligence in this area. The legal proceedings relating to the Buncefield explosion are far from over. These civil proceedings for damages still have further stages to run involving proof of ‘special damage’ and quantification of claims, unless they settle before the proceedings become necessary. Criminal proceedings against the companies involved will no doubt go ahead. It is to be hoped that, as these hearings unfold, lessons can continue to be learned which will assist those in running major hazard facilities such as Buncefield to avoid further disasters of this sort. Neil Foster Newcastle Law School University of Newcastle NSW, Australia 70 71 72 73 Ibid., para. 104. [2003] QCA 339. [2005] QCA 405. [2003] VSC 27. See especially paras 1346–1351 summing up; and see also the discussion of this case in T. Palmer, ‘Gas Explosions, Compensation and Litigation: The aftermath of the Longford Gas Explosion in Victoria’ (October 2008) Brief 13–17 (in light of a more recent, 2008, explosion and fire at a gas processing plant in Western Australia). ––––––––––––––––––––––––––––––––––––––––––– 14 ––––––––––––––––––––––––––––––––––––––––––– E N V L R E V 1 2 ( 2 0 1 0 ) 1 – 1 4